rewrite this title Earnings Preview: What to look for when Kroger (KR) reports Q1 2025 results | AlphaStreet

The Kroger Co. (NYSE: KR) is expected to report its first-quarter financial results next week. Customer engagement remained stable last year, driven by high-quality products and tailored promotional offers. Recently, the company guided positive same-store sales for fiscal 2025, encouraged by its growing digital footprint and strength of private label brands. As a domestically focused retailer, it sees less impact from the new import tariffs.

After experiencing weakness in recent weeks, the Cincinnati-headquartered grocery chain’s stock is regaining momentum ahead of the earnings. KR has grown an impressive 30% in the past year. The shares have consistently stayed above the 12-month average value of $60.30 after withdrawing from their April peak. The company has regularly hiked its dividends and currently offers a better-than-average yield of about 2%. In a recent statement, the management said it is on track to meet the target of delivering total shareholder returns of 8-11% for the long term.

Q1 Report on Tap

The company is getting ready to publish its first-quarter 2025 results on Friday, June 20, at 8:00 am ET. Analysts’ consensus earnings estimate for the quarter is $1.45 per share, on an adjusted basis, and they are looking for total sales of $45.29 billion. In the year-ago quarter, the company earned $1.43 per share on revenues of $45.27 billion. The retailer has a strong track record of delivering better-than-expected results, with quarterly earnings consistently beating estimates for over five years.

From Kroger’s Q4 2024 earnings call:

“We are focused on investing in projects that will maximize return on invested capital over time while remaining committed to maintaining our current investment-grade rating, growing our dividend over time, subject to board approval, and returning excess capital to shareholders. In 2024, we announced our plans to significantly increase our investment in major storing projects, including new stores to accelerate sales growth and improve share, while supporting our long-term growth model.”

Mixed Q4

In the fourth quarter of 2024, Kroger’s sales dropped to $34.31 billion from $37.06 billion in the prior year quarter. Identical sales, without fuel, increased by 2.4%. Adjusted profit decreased to $1.14 per share in Q4 from $1.34 per share in the previous year’s fourth quarter, but beat estimates. On an unadjusted basis, net earnings were $634 million or $0.90 per share in Q4, compared to $736 million or $1.01 per share in Q4 2023.

The management said it expects identical sales, without fuel, to be up 2– 3% in fiscal 2025. Adjusted earnings, on a per-share basis, are expected to be between $4.60 per share and $4.80 per share. It is looking for adjusted free cash flows of $2.8-$3.0 billion for FY25. The target for capital expenditures is in the $3.6-$3.8 billion range.

Outlook

Of late, Kroger has been expanding its digital capabilities, offering faster order delivery and facilities like curbside pick-up to shoppers. The company’s thriving pharmacy business and steady growth of private brand sales should continue to be its key strengths. Meanwhile, sales might come under pressure from cautious consumer spending, amid elevated inflation, and growing competition.

On Friday, the shares opened higher and traded up 1% in the early hours of the session. The stock has traded mostly sideways this week.